Bird & Bird represents Easynet in Court of Appeal decision clarifying the law on Cross Border Mergers

The Court of Appeal decision in Easynet Global Services Ltd [2018] EWCA Civ 10 (18 January 2018) has clarified the extent of the UK Court's discretion to approve mergers under the Cross-Border Merger Regulations.  This clears the way for multiple companies to be consolidated cross-border within the EU.  

In Easynet, it was proposed to merge 22 UK subsidiaries and 1 Dutch subsidiary in to one UK parent.  Inclusion of the Dutch company provided the necessary cross-border element to use the Regulations, being the simplest and most cost-effective way to implement the reorganisation.  However, since the Dutch company was only a dormant shell, the judge at first instance decided that the merger was in reality a domestic transaction, that the inclusion of the Dutch subsidiary was merely a device and that the merger should not be allowed.

The Bird & Bird team, led by partner Neil Blundell, were successful in overturning the previous decision, with The Court of Appeal allowing the merger finding that:

• To deny the merger would be to restrict the freedom of establishment of the Dutch company, one of the principal freedoms in the EU.
• The participating companies were not abusing the cross-border merger mechanism.
• UK Courts were obliged to approve a cross-border merger that met the relevant legal requirements.
• The relevant legal requirements should be given a straightforward interpretation according to their natural meaning.  Specifically, the Court did not need to consider the scale of operations of the companies concerned (so the fact that the Dutch company was dormant was irrelevant).

Neil Blundell commented: "The Court of Appeal decision makes it easier to rationalise large EU group structures in a relatively straightforward and cost effective way.  Since it is likely that after Brexit UK companies will no longer be able to use the Regulations, a short window of opportunity now emerges to rationalise large EU group structures even where the companies involved are predominantly UK. Nobody had previously sought to merge so many companies using the Cross Border Mergers Regulations.   We are grateful for our client's commitment to see through what we believed was a necessary and overdue clarification of the scope of the Regulations in this respect. "

Bird & Bird advised Easynet on the proposed merger (partner Neil Blundell and associate Mark Penwarden).  Counsel for Easynet was Stephen Horan of Erskine Chambers together with David Scannell of Brick Court Chambers on the Appeal.